If an ISP is charging you $50/month for 10Mbps speed and has to pay $14/Mb for transit costs, how are you getting it so cheap?

The answer is that the industry utilizes a mathematical model (usually 4:1). Using such a model then shows that they are receiving $200/month for the 10Mb they are selling. Which if the 10Mb costs them $140/month, then they are making $60/month in Gross revenue, minus all the expenses they have.

Now you add those who want to utilize P2P 24/7/365, they either have to spend more for bandwidth or they will charge you more OR cap those who are abusing the network relationship.

Makes perfect sense to me…..

For a new broadband network (i.e. new access) – true in many developing countries that either have no copper or haven’t unbundled their local loop, Internet bandwidth contributes just about 20-30% of total cost; as content becomes more local, this proportion reduces further. Simultaneously, the cost of laying and/or upgrading last mile is going up.

It is a matter of time before backbone networks – even in over-supplied regions – run out of capacity and will need additional investments. At this point in time, about $5-8 billion is being invested in new submarine cable projects in Asia-Pac, Middle East, Africa, etc. Ten to twenty times more will be needed in enhancing access networks. Fixed rate, unlimited download packages cannot support such investments – undoubtedly, the cost of using Broadband in many markets incl. USA will go up in the next couple of years.

There is also info on DSL Reports just search their site for it.
Enjoy!

You assume a level of integration within these companies that isn’t there. The last mile network people are just another customer to the backbone guys and the backbone guys are just an ISP they are forced to deal with to the last mile guys. The rates charged to the last mile guys are pretty arbitrary, as after all the backbone guys have a monopoly. The benefits of good peering deals are not passed on to the last mile guys — they’re used to offset the backbone O&M. By the same token, loss of peering revenue will not be passed directly on to the customer. Instead it will be reflected in a lower O&M budget. The customer will feel it in terms of reduced quality of service (reduced support, slower network upgrades, longer turnarounds on field service requests, etc.). Remember, at the corporate level; sales makes money, operations costs money.

But metering isn’t really about last mile capacity, that’s just the carriers’ Big Lie. Metering is a tool to keep profits high (keep consumer Internet access constant while carrier’s price falls) and make it harder for TV over Broadband to compete with TV over cable/satellite. That carriers are so determined to ration access to the Internet is surely one of the factors driving falling Internet access prices.

Actually come to think of it… dropping income from transit deals might drive the likes of AT&T to put the squeeze on customers to get more money on that end of the two-sided market.

Also have a look at this peering and transit explanation (yes, by me)
http://arstechnica.com/guides/other/peering-and-transit.ars